Crestmark Bancorp to be Acquired by Meta Financial Group

Meta Financial Group (“Meta”), the holding company for the federally chartered savings bank MetaBank, announced it has reached an agreement to acquire Crestmark Bancorp, Inc. (“Crestmark”), the holding company for the Michigan state-chartered bank, Crestmark Bank, in an all-stock transaction. Meta operates in several segments within the banking and payments industries. Crestmark is a commercial lender specializing in providing diverse financial solutions to businesses. This acquisition provides Meta with a national commercial and industrial lending platform, and is intended to add an immediate pipeline of insurance premium financing business and provide opportunities for innovation and synergistic cross-selling among business lines. It is expected to be immediately accretive to 2018 earnings per share, excluding merger costs, approximately 10% earnings per share accretive for fiscal year 2019 and to have a tangible book value earn back period of approximately 2.2 years. Upon the closing of the transaction, Crestmark will operate as a division of MetaBank.

“With this acquisition, we continue to deliver on our goal of growth and innovation through diversification,” said J. Tyler Haahr, Chairman and CEO of Meta. “This transformational transaction will allow us to significantly add on-balance sheet loans at attractive yields with the addition of Crestmark’s national lending platform. It also creates complementary cross-sell opportunities for our insurance premium finance business. Crestmark has built an enviable lending platform, and we believe the business is poised for rapid growth. We look forward to welcoming their tenured management team and talented workforce to Meta.”

Crestmark, through Crestmark Bank, is a commercial lender offering asset-based loans, equipment finance leases and government guaranteed loans to small and mid-sized businesses across the US. Crestmark focuses on working with a broad range of industries, including manufacturing, transportation and health care.

“The merger of Meta and Crestmark results in the complementary combination of a leading player in the payments industry and low-cost deposit generator with a premier, high-margin asset generator,” said W. David Tull, Chairman and CEO of Crestmark. “The synergies will enable the combined entity to grow and prosper. Additionally, Crestmark will be able to leverage the power of Meta’s low-cost deposit franchise and larger balance sheet to capitalize on even more growth opportunities.”

The Crestmark transaction will build upon Meta’s previous lending acquisition of AFS/IBEX, which it purchased in December 2014. With this acquisition, Meta’s growing national lending offerings will help to offset much of the seasonality created by its other divisions. Meta Payment Systems specializes in payments products, particularly prepaid cards, which spike in sales at various times of the year such as holidays and tax season. Refund Advantage, EPS Financial and Specialty Consumer Services make up Meta’s tax-related financial solutions divisions, which are also seasonal.

Crestmark will continue to operate from its offices in Troy, Michigan. Upon the closing of the transaction, W. David Tull, Crestmark’s Chairman and CEO, and one other mutually agreeable director, will each join the Meta board, and Michael “Mick” Goik, President and Chief Operating Officer of Crestmark, will become EVP of MetaBank and President of the Crestmark division of MetaBank.

Pursuant to the terms of the agreement, Crestmark will merge with and into Meta, and Crestmark Bank will merge with and into MetaBank. MetaBank had $5.2 billion in assets and $1.3 billion in total loans on Sept. 30, 2017. On a pro forma consolidated basis, the combined company would have had approximately $6.4 billion in assets and $2.2 billion in loans and leases at the end of September 2017, with lending operations throughout the US. Under the terms of the agreement, Crestmark shareholders will receive 2.65 shares of Meta common stock for each share of Crestmark common stock. The aggregate value of the acquisition consideration, based on the closing price of Meta shares on January 8, 2018 of $91.35, is $320.6 million, or $242.08 per Crestmark share. Meta anticipates issuing approximately 3.3 million shares to Crestmark shareholders. The transaction is intended to qualify as a tax-free reorganization for US federal income tax purposes. Giving effect to the transaction, existing shareholders of Meta are expected to own approximately 75 percent of the outstanding shares of Meta, and Crestmark shareholders are expected to own approximately 25 percent of the outstanding shares of Meta.

It is anticipated that the transaction will close in the second calendar quarter of 2018. The transaction is subject to closing conditions, including the approval of bank regulatory authorities, receipt of third party consents and the receipt of approval by shareholders of both Meta and Crestmark. In connection with the parties’ entry into the agreement and plan of merger, certain shareholders of Crestmark, including certain of its current directors and senior executives, entered into agreements to vote in favor of the transaction.

Raymond James & Associates, Inc. is acting as financial advisor to Meta and delivered a fairness opinion to the Meta Board of Directors. Katten Muchin Rosenman LLP is serving as legal counsel to Meta. Sandler O’Neill + Partners, L.P. is acting as financial advisor to Crestmark. Dickinson Wright PLLC is serving as legal counsel to Crestmark.

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